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(121)-TAXATION FOR COMPANIES

Tuesday, March 9, 2010

Taxation for Companies

Companies pay corporation tax on the profit they earn. Note that because a company has a separate legal personality, its tax is included in its accounts. An unincorporated business would not show income tax in its accounts, as it would not be a business expense but the personal affair of the proprietors.

Presentation in accounts
  • The charge for corporation tax on profits for the year is shown as a deduction from net profit, before appropriation.
  • In the balance sheet, tax payable to the government is generally shown as a current liability as it is usually due within nine months of the year end.
  • For various reasons, the tax on profits in the profit and loss account and the tax payable in the balance sheet are not usually the same amount.

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